Feds sue biggest US banks over risky mortgages

Funny, if the suit forces bankruptcy on the bank, then does the FDIC (with also federal backing) come in a bail the depositors, probably with tax money?  This lawsuit is very illogical.

In a sweeping move, the government on Friday sued 17 financial firms, including the largest U.S. banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.

Among the 17 targeted by the lawsuits were Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Goldman Sachs.

The lawsuits were filed Friday by the Federal Housing Finance Agency which oversees Fannie and Freddie, the two agencies that buy mortgages loans and mortgage securities issued by the lenders.

The total price tag for the securities bought by Fannie and Freddie affected by the lawsuits: $196 billion.

The government didn't provide a dollar amount of how much it seeks in damages. It said that it wants to have the purchases of the securities canceled, be compensated for lost principal and interest payments as well as attorney fees and costs. The lawsuits allege the financial firms broke federal and state laws with the sales.

Home mortgage-backed securities were risky investments that collapsed after the real-estate bust and helped fuel the financial crisis in late 2008.

Finally, what is the ultimate purchase of this lawsuit.

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U.S. to sue big banks over mortgage securities: report

Fannie Mae and Freddie Mac lost more than $30 billion, due partly to their purchases of mortgage-backed securities, when the housing bubble burst in late 2008. Those losses were covered mostly with taxpayers' money.

The agency filed suit against UBS in July, seeking to recover at least $900 million for taxpayers, and the individuals told the Times the new suits would be similar in scope.

A spokesman for the Federal Housing Finance Agency was not immediately available for comment.

The Times said Bank of America, JP Morgan and Goldman Sachs all declined comment. A Deutsche Bank spokesman told the Times, "We can't comment on a suit that we haven't seen and hasn't been filed yet."

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Redwood: Government can't keep paying for mortgages and housing programs

I little background here.  One reason that mortgage rates are so, is that the Federal government nearly all mortgages.  This puts the tax prayers on the hook for any losses from the agencies.  Redwood is arguing that system is can't go on, and we should return private mortgage market, set by supply and demand.  This federal support also makes housing more expensive than people can afford.

Through Fannie Mae, Freddie Mac and Ginnie Mae, the government finances more than 95% of the mortgages currently being written in the U.S. When Congress comes back from recess in September, it will have a chance to begin unwinding its lifeline. The conforming loan limits, or the maximum amount of a loan that can be guaranteed by Fannie, Freddie or insured by the Federal Housing Administration, expires Oct. 1.

Already the industry is pushing its support of a bill in the House and another in the Senate to extend these limits. Other reforms remain on the distant horizon, including the reform of Fannie and Freddie.

And....

"Many real estate agents, homebuilders and banks appear to benefit from such a status quo. Our strategic outlook, however, is that over time the current outsized role of government support for the $9.6 trillion residential mortgage market is simply not sustainable, especially in light of the painfully heated debates throughout 2011 over raising the $14.3 trillion federal debt ceiling," Redwood said.

Link Here

Fannie, Freddie pressured to rent more foreclosures

I know of two people that are renting from the Bank.  Question when did bank go into the Real Estate Investment business?

Sen. Jack Reed (D-R.I.) sent a letter to the chief regulator of Fannie Mae and Freddie Mac, urging the two companies to convert their repossessed properties into rental units and pool them for sales to investors.

Fannie Mae repossessed 53,697 properties through foreclosure in the second quarter, roughly flat from the previous quarter. While that is down from more than 68,800 repossessions one year ago, Fannie said the total was artificially depressed due to extended delays in the foreclosure process.

These delays will continue to push expenses up and delinquency rates elevated for a company that has already pulled more than $104 billion in bailouts from the Treasury Department and reported another $5 billion in losses for the quarter.

"Moreover, Fannie Mae believes these changes in the foreclosure environment will delay the recovery of the housing market because it will take longer to clear the housing market’s supply of distressed homes, which typically sell at a discount to nondistressed homes and, therefore, negatively affect overall home prices," the company said in its financial report released Friday.

In his letter to Federal Housing Finance Agency Acting Director Edward DeMarco, Reed said the government-sponsored enterprises could install a major rental program that could milk at least some revenue out of properties otherwise sitting vacant.

In Rhode Island, alone, Reed wrote, the average monthly rent for a two-bedroom apartment increased 54% since 2000.

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Foreclosure Activity is down in 2011, but it's to processing delays

Reality Trac has stated it's not due to the improvement of the economy or the housing industry.

IRVINE, Calif. – July 14,  2011 – RealtyTrac® (www.realtytrac.com),  the leading online marketplace for foreclosure properties, today released its  Midyear 2011 Foreclosure Market Report, which shows a total of 1,170,402 U.S.  properties received foreclosure filings — default notices, auction sale notices  and bank  repossessions — in the first six months of 2011, a 25 percent decrease from  the previous six months and a 29 percent decrease from the first half of 2010.  The report also shows that 0.90 percent of all U.S. housing units (one in 111) had  at least one foreclosure filing in the first half of the year.

Foreclosure filings were reported on 222,740 U.S. properties  in June, an increase of nearly 4 percent from the previous month, but a  decrease of 29 percent from June 2010. June was the ninth straight month where  foreclosure activity decreased on a year-over-year basis. Default  notices, scheduled  auctions and REOs were all up on a month-over-month basis but down  on a year-over-year basis in June.

Foreclosure filings were reported on 608,235 U.S. properties  during the second quarter, a decrease of nearly 11 percent from the first  quarter and a decrease of 32 percent from the second quarter of 2010. The  second quarter total was the lowest quarterly total since the fourth quarter of  2007. All categories of foreclosure were down both on quarterly basis and  annual basis in the second quarter.

“It would be nice to  report that foreclosure activity is dropping as a result of improvements in the  economy or the housing market,” said James J. Saccacio, chief executive officer  of RealtyTrac. “Unfortunately, with unemployment rates inching back up,  consumer confidence weak and home sales and prices continuing to languish, this  doesn’t appear to be the case.

“Processing and  procedural delays are pushing foreclosures further and further out – we  estimate that as many as 1 million foreclosure actions that should have taken  place in 2011 will now happen in 2012, or perhaps even later. This casts an  ominous shadow over the housing market, where recovery is unlikely to happen  until the current and forthcoming inventory of distressed properties can be  whittled down to a manageable number.”

Link Here

Leading Mortgage Firms May Be Forced To Reduce Loan Balances For Distressed Homeowners

Breaking news from Huff Po.

Mortgage principal reductions would comprise part of a larger fine levied on Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial. Penalties could reach $30 billion, officials said.

The forced reduction of mortgage principal as a penalty against flawed past practices has proven contentious. Some Republican attorneys general have objected, as have some Republican members of Congress.

On Tuesday, however, a state official told The Huffington Post on condition of anonymity that the option "very much remains on the table."

While officials have not determined how much would be exacted from the banks -- and specific dollar amounts to settle the probes have not yet been discussed between the state and federal governments and the banks -- the proposal to compel financial firms to cut loan balances is part of one of two documents circulated Tuesday at a hotel in northern Virginia, where bankers, state officials and policy makers from the Obama administration began a three-day meeting.

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Bernanke Faces Greater Scrutiny After Republican Election Gains

This is something to be followed.  The Fed was trying to push interest/mortgage ever downward.  The GOP may stop these plans and rates may float again with supply and demand which probably means higher rates.

“There’s certainly going to be more hearings and more pressure,” said Mark Calabria, a former Republican Senate Banking Committee aide who is now director of financial- regulation studies at the Cato Institute, a policy research group in Washington that favors free markets.

One new Fed opponent in Congress is Kentucky Senator-elect Rand Paul, who has criticized the Fed for imposing “the sneakiest tax of all -- inflation.” He joins South Carolina’s Jim DeMint, an advocate for Tea Party candidates who backed an unsuccessful bill to subject the Fed’s monetary policy to congressional audits.

 A lot of politicians were critical of bailout and loans to AIG, Fannie Mae, and Freddie Mac.

Bernanke argued that audits of monetary policy would compromise the independence of the central bank. A letter he sent to DeMint in May warned that audits would “seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation.”

Darrell Issa, who would take over as the chairman of the House Oversight and Government Reform Committee and be the Republican’s chief inquisitor of administration, already has the Fed in his sights. This year, he’s pressed the central bank for documents related to the AIG rescue and demanded Bernanke explain his role in authorizing payments to the insurer’s counterparties, calling him an “unindicted co-conspirator” in the bailout.

Scrutiny of the central bank will continue, Issa pledged in an interview last month, saying that Congress must “look in- depth behind the curtain, rather than simply have the Fed chairman come up and lecture us.”

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Fed Will Probably Start $500 Billion of Bond Buys, Survey Shows

This will affect mortgage rates in the short and long term.  However, I doubt we will know the full impact immediately.

The Federal Reserve will probably begin a new round of unconventional monetary easing this week by announcing a plan to buy at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News.

Policy makers meeting tomorrow and Nov. 3 will restart a program of securities purchases to spur growth, reduce unemployment and increase inflation, said 53 of 56 economists surveyed last week. Twenty-nine estimated the Fed will pledge to buy $500 billion or more, while another seven predicted $50 billion to $100 billion in monthly purchases without a specified total. The remainder said the Fed would buy up to $500 billion or didn’t quantify their forecast.

And if you are in the housing the market the big question on mortgage rates.

The central bank last month asked bond dealers and investors for projections of its asset purchases over the next six months, along with the likely effect on yields. The New York Fed, the branch of the Federal Reserve System that implements monetary policy, asked about expectations for the size of the program and the time over which it would be completed, according to a survey obtained by Bloomberg News.

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Obama administration sings new tune on foreclosures

And White House Press Secretary Robert Gibbs last month told reporters that without sales of homes in distressed areas the "recovery in the housing market stops. It's frozen."

"That obviously can have -- we believe and others believe -- a very negative and detrimental impact to our economic recovery efforts and the housing markets in states that have been hardest hit," Gibbs said

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Will next week the Fed starts pumping money and will it cause higher mortgage rates

There has a fury of news and commentary this week and over the last weeks concerning the possible new Fed purchasing US Treasuries.  The concern is that as the Fed prints money to purchase these Treasuries will cause inflation and therefore higher mortgage rates.  Here's the policy in a nut shell:

...The central bank is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, a measured approach in contrast to purchases of nearly $2 trillion it unveiled during the financial crisis. The announcement is expected to be made at the conclusion of a two-day meeting of its policy-making committee next Wednesday.

The Fed's aim is to drive up the prices of long-term bonds, which in turn would push down long-term interest rates. It hopes that would spur more investment and spending and liven up the recovery. But officials want to avoid the "shock and awe" style used during the crisis in favor of an approach that allows them to adjust their policy, and possibly add to their purchases, over time as the recovery unfolds...

 Now this is the concern of the program

...Some investors are on edge about how the Fed will proceed. On the one hand, the Dow Jones Industrial Average has risen 12% since Mr. Bernanke began hinting about buying more bonds two months ago, a welcome rise inside the Fed.

But commodities prices are also soaring, with copper, gold and oil prices rising 16%, 8.1% and 13% respectively. That could portend more inflation than the Fed wants. At the same time, the dollar has slid nearly 10% against the euro; that could help U.S. exports, but it creates tensions with trading partners. A sharp drop in the dollar could give Fed officials pause..

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Half of HAMP permanent mortgage mods will redefault

According to the Congressional Oversight Panel half the permanent mortgage modifications will redefault.

Since the HAMP launched in March 2009, servicers have completed 495,898 permanent modifications, and extended 1.6 million trials. So far, the Treasury has committed nearly $30 billion to the servicers for a program that was initially estimated to cost $50 billion.

This 495,898 is actually a low number, since over 1.3 million have applied to HAMP, but most got rejected.  The rate is now closer to 75% to 80% if you include rejected applications, trial modifications that were rejected, and redefaults on permanent mortgage mods.

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Federal Reserve report details agency's efforts to address foreclosure crisis

The 20-page report was released as part of a two-day joint housing and mortgage symposium sponsored by the Fed and the Federal Deposit Insurance Corp. that began Monday in Washington, D.C.

The report, "Addressing the Impact of the Foreclosure Crisis," details the activities of the Fed's 12 presidents and the board of governors under the 2009 Mortgage Outreach and Research initiative. The document highlights the federal government's efforts to respond to the crisis at a local level.

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Obama foreclosure-relief plan fails to show gains

This number will go much higher.  There are many homeowners in the trial phase that are still defaulting.

The Treasury Department says about 729,000 homeowners who applied to have their mortgage payments lowered have been disqualified through September. That's about 53 percent of the nearly 1.4 million who enrolled in the program over the past year. And it's up from about 680,000 a month earlier.

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Fed boss: Regulators looking into foreclosure mess

There has been a great deal of questions on what will be the final outcome of foreclosure-gate.  These could be some of the remedies.

The federal agencies have a range of options at their disposal. They include issuing a "cease and desist" order requiring a company to stop engaging in a specific practice. They can impose fines on the companies. Agencies also can take less drastic actions, such as crafting a plan with the company to fix any problems.

Bernanke didn't provide details in his speech.

According to people familiar with the examination, the banking agencies are looking into whether companies had controls in place when foreclosure documents were signed, what procedures were in place to proper handle documents, and whether employees involved in the foreclosure process were adequately trained.

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What It Takes to Get a Loan

If you're buying or refinancing the mortgage on your primary home, you'll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan (125% of a metro area's median home price, up to $729,750). With 20% or more down, you avoid private mortgage insurance, which typically costs 0.5% to 1.5% of your loan amount per year.

Fannie Mae and Freddie Mac allow a minimum credit score of 620 if you have at least 25% equity in the property or a score of 660 with equity of less than 25%; you'll get the best rate if your score exceeds 720. The FHA will soon require a minimum credit score of 580 to qualify with a down payment of 3.5%, but FHA lenders often impose a higher minimum score of 670.

Now look at the rules for the home equity refinance

Now in most cities you'll be able to borrow no more than 80% of the appraised value, less the mortgage. In some cities you may get away with 90%, says Keith Gumbinger, of HSH Associates. But in areas where prices have plummeted, such as parts of Florida, Nevada and California, the loan-to-value ratio goes as low as 60%.

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Lawsuits Reflect Widespread Frustration With Government's Mortgage Modification Program

More details coming out about the HAMP loan modification program.

Under HAMP, the Treasury Department gives mortgage servicers $1,000 incentive payments to reduce borrowers' monthly payments, mostly by cutting interest rates. If an eligible borrower makes his or her reduced payments for three or four months during a trial period, the modification is supposed to become permanent. Often, trials drag on for much longer.

"Rather than allocating adequate resources and working diligently to reduce the number of loans in danger of default by establishing permanent modifications, Bank of America has serially strung out, delayed and otherwise hindered the modification processes that it contractually undertook to facilitate when it accepted billions of dollars from the United States," says the complaint seeking class action filed in July by Teresa Follmer of Mesa, Ariz.

The the interaction between the bank and HAMP.

Bank of America argues that borrowers don't have standing to sue because they aren't parties to the Servicer Participation Agreement between the bank and the Treasury Department. In its motion to dismiss Follmer's suit, Bank of America notes that Treasury has made lots of changes to its "constantly evolving new federal program" and if a borrower is eligible, "the servicer is obligated to consider the borrower for a HAMP modification" -- not necessarily to grant it.

HuffPost reported last week that a Bank of America employee told Troy Taliancich, who has been in a HAMP trial for most of the year, that his modification had stalled because of Treasury's changing rules. "Right now, at this point, the government changed the process a little bit," the employee said. "We changed the procedure and you are one of the homeowners that fell into the middle of when the process changed.

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New York Fed Urges BofA to Buy Back Loans

More trouble for BofA, after they restarted their foreclosures.

The New York Fed, along with BlackRock, the Pacific Investment Management Company and others, argued in a letter to Bank of America and the Bank of New York Mellon that Countrywide failed to properly service the loans. (Read it at the end of the post.)

What happen is that in 2008 BofA purchased Country-wide at a deep discount.  However, the cost of the purchase still coming to light, which these investment companies pushing for these loans buy backs.

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U.S. eyes criminal violations in foreclosure crisis

This is more of the daily updates on foreclosure-gate.

Two sources familiar with the Financial Fraud Enforcement Task Force indicated the multi-agency effort by investigators in the Justice, Treasury and Housing Departments would determine whether prosecutors would ultimately pursue criminal or civil penalties - or both.

The Task Force has scheduled a meeting for Wednesday morning at the Department of Housing and Urban Development. Upon conclusion a briefing is likely at the White House, officials said

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Mortgage Rates Break All-time Record, Under 5% for 23 Consecutive Weeks

According to McLean, VA - based Freddie Mac's (OTC:FMCC) latest Primary Mortgage Market Survey  (PMMS), the 30-year fixed-rate mortgage rate fell again to break the survey's all-time low; the 30-year FRM has been under 5 percent for 23 weeks in a row. The last time 30-year FRM rates were this low was April 1951 (based on a data series of FHA rates going back to 1948). The 5-year ARM tied the all-time survey low set last week.

Many people including myself believe that mortgage rates would have increased after the Fed stop purchasing mortgages in March 2010.  However, they have dropped to record lows.

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Dollar Depreciation and the Higher Cost of Living

This leads to higher mortgage costs which will put pressure on housing prices.

In turn, dollar-denominated commodities have surged. Since August 27, when Bernanke first suggested that the Fed might consider another round of QE at his Jackson Hole speech, the price of gold has jumped 9%; the price of copper is up 12%; the price of crude oil has increased by $7.49; and soft commodities like wheat, cotton and corn have all shot higher.

Strategists like Gluskin Sheff's David Rosenberg have questioned what this currency debasement will now mean for your friends and neighbors. Rosenberg recently argued that, with oil back over $80 per barrel and US gasoline prices at the pump heading back above $3 per gallon, we will come to think of this dollar depreciation as a source of restraint for the consumer.

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